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Earthworms can increase plant nitrogen (N) availability by stimulating mineralization of organic matter. However, recent studies show that they can also cause elevated emission of the greenhouse gas nitrous oxide (N2O). It is unclear to what extent these two effects occur in fertilized grasslands, where earthworm densities are typically greatest. The aims of this study were therefore to (i) quantify the effects of earthworm activity on N uptake and N2O emissions in fertilized grasslands and (ii) link these effects to earthworm functional groups. In a 73-day factorial mesocosm experiment, combinations of Lumbricus rubellus (Lr, epigeic), Aporrectodea longa (Al, anecic) and Aporrectodea caliginosa (Ac, endogeic) individuals were introduced into columns with grass growing on a fertilized (250 kg N ha−1) loamy soil. Introduction of Lr resulted in 50.8% (P < 0.001) larger N2O emissions and 5.4% (P = 0.032) larger grass biomass. Grass-N uptake increased from 172 to 188 kg N ha−1 in the presence of Lr (P < 0.001), from 176 to 183 kg N ha−1 in the presence of Ac (P = 0.001), and from 168 to 199 kg N ha−1 when all three earthworm species were present (P = 0.006). Lr increased soil NH4+-N concentrations (P = 0.010), further indicating enhanced mineralization of N caused by earthworm activity. We conclude that the previously observed beneficial effect of earthworm presence on plant-N availability has a negative side-effect: increased emissions of the mineralized N as N2O.